Ghana presents 2023 budget to parliament

Ghana's Minister of Finance, Ken Ofori-Atta, has laid out the country's 2023 budget to parliament, presenting a $250.4 billion CDS budget for the upcoming year. One of the key highlights of the budget is a 2.5% increase in value-added tax, along with a reduction in the E-Levy to 1.1%. Courage Boti, an economist at G.C.B Capital, provided insights on this development during an interview with CNBC Africa. Boti highlighted the challenging economic backdrop Ghana is facing, with the country at high risk of debt distress. The budget aims to address this by focusing on measured revenue growth, expected to reach 143 billion from an initial target of 105 billion. However, the deficit is projected to increase to 7.7% of GDP, indicating a rigid fiscal position. The high costs of interest payments, goods and services, and wages and salaries for public sector workers are significant drivers of expenditure, consuming a substantial portion of the budget. According to Boti, the depreciation of the city is a critical concern impacting Ghana's debt management. The external component of the country's debt stock has risen significantly, with the dollar dominating around 70.7% of the total debt. The lack of foreign financing in the current economic climate has further exacerbated the debt situation. The increase in value-added tax by 2.5% poses a challenge for ordinary Ghanaians already grappling with a cost of living crisis. While necessary for revenue growth, this tax hike is expected to burden citizens further. Boti suggested exploring innovative ways to expand the tax base rather than imposing additional taxes on existing taxpayers. Overall, the 2023 budget reflects Ghana's efforts to navigate a complex economic landscape marked by debt distress and fiscal challenges. The government's decisions on taxation and expenditure will play a crucial role in shaping the country's financial health in the coming year.